- European equity markets have had a slight rebound from the losses seen on Thursday's session. After declining over 3% on yesterday's session, Italy's FTSE MIB has gained over 1%, as markets focus on the upcoming parliamentary elections (Feb 24-25th). In France the CAC-40 index has outperformed amid gains in banks, France Telecom and Arcelor Mittal. In terms of today's session, traders are focusing on the EU Commission's updated forecasts, German IFO data, ECB announcement related to LTRO repayments and property price data out of China.

Speakers:- EU Commission released its winter forecasts that cut euro zone GDP growth from +0.1% to -0.3% and cut growth in core countries. EU lowered Germany GDP from +0.8% to +0.5% while France GDP was cut from +0.4% to +0.1%. The Spanish forecasts were in line with press leaks. EU forecasted Spain 2013 deficit at 6.7% v 4.5% prior target; 2014 deficit seen wider at 7.2%- EU's Rehn commented that ongoing rebalancing continued to weigh on economy; Europe must stay the course on reforms and will be fruits of efforts in 2014. Improvements in the financial markets had yet to feed into the real economy. Global economy appears to have turned the corner and improve. He stressed that fiscal deadlines could be extended if economic growth did fall short but no ruling until spring. Euro Area govt debt seen stabilizing in 2014; high level of debt could be a drag on growth for a long period of time. To revisit France's deficit targets in May, France's reforms must continue, including pensions- ECB's Coene (Belgium) noted that the current level of the euro was absolutely no problem. He added that Belgium 2012 budget deficit was seen at 3.0% of GDP (incl Dexia rescue 3.7%)- ECB's Coeure (France) commented that ECB's non-standard measures played critical role in preventing deflationary scenario and reiterated ECB view that signs of stabilization had increased in recent months. He saw good reasons to be cautiously optimistic as banks were decreasing reliance on ECB funding. He added that a turning point for Spain and Portugal to come in 2013 or 2014 period. Italy was showing no evidence of improving competitiveness- BoE and PBoC in discussions on a 3-year swap agreement after BoE gov King and PBoC chief Zhou met to discuss the arrangements in Beijing. The BOE noted that the deal would support trade and direct investment- German IFO Economists: Manufactures were considerable more optimistic The IFO basically reiterates its January statement in which Q1 German GDP seen at +0.2% as exports seen regaining momentum. It also reiterated that strong Euro was not appearing to have impact and the construction sector doing well with order books full. Lastly it noted that the upcoming Italian elections had yet to have an impact on Survey- Senior German Lawmaker Meister commented that needed to carefully study Cyprus systemic relevance to the Euro and that Cyprus bank stakeholders should help in aid bid. He added that the size of Cyprus bailout was negligible- Poland Central Banker Zielinska-Glebocka stated that she still supported the case for a Base rate cut at the March policy meeting- India Commerce Sec Rao commented that the upcoming budget might try to increase exports as trade deficit hurts INR currency (rupee) (Note: India Finance Minister will present the annual budget on Thursday, Feb 28th )- EU's Alumina: Could complete settlement with the Google [GOOG] after the summer; yet to decide whether to open new probe- Moody's affirmed Negative Outlook for Ireland noting that the fragility of economy weighed on rating but the country was on course to emerge from bailout. Ireland deal on bailout loan payments would be positive and more significant than the promissory note agreement but saw political delays for any Irish and Portugal loan deals- South Korea incoming Pres Park: To sternly punish North Korea for any provocation- Hong Kong Fin Sec Song announced additional property cooling measures as housing bubble risks had increased, prices were 120% higher than 2008 low- Iran Bushehr nuclear facility said to be halted for turbine repairs until end of month

Currencies:- The EUR/USD was on firmer footing in the session following a better German IFO reading and could get further support with a healthy LTRO repayment result. Dealers noted that LTRO results could be comprised due to the close proximity of the weekend Italian election but the peripheral spreads did reverse an earlier rose. Both Spain and Italian 10-year yields were approx 5bps lower. The EU winter forecasts did take the Euro off its best levels as it cut the over EMU growth outlook as well as cut GDP views for core Europe. The EUR/USD approached the NY morning just above the 1.32 handle.- JPY was softer as PM Abe began his visit to Washington. He is expected to announce his choice for the next BOJ gov after the trip.

Political/In the Papers:-(EU) ECB's Coene (Belgium): Current level of the euro is absolutely no problem; Belgium 2012 budget deficit 3.0% of GDP (incl Dexia rescue 3.7%); Belgium national debt likely to exceed 100% of GDP in 2012.- ECB's Hansson (Estonia) reiterated that price stability was the main priority of ECB and stressed that the euro exchange rate was close to historical average. He added that the ECB monitoring exchange rate- (EU) German Fin Min Schaeuble: Reiterates that the current level of the euro is appropriate, 1.33 to 1.35 is a good range- (FR) The sharp decline in France's money supply could signal an economic slowdown; Morgan Stanley cautious on French bonds (OATs) - Telegraph's Ambrose Evans-Pritchard-(UK) BoE's Miles: More QE is warranted, a 3% GDP output gap would justify up to £175B in additional easing- (UK) Chancellor Osborne's borrowing targets remain at risk, despite better Jan public finances data - Telegraph-(AU) RBA Gov Stevens: Slowdown in China economy has come to an end; US seeing continued gradual recovery - testimony before the House of Representatives; Currently the economy has appropriate level of cash rate; Too early to discuss rate rise cycle; Easing more likely than tightening.